Vedanta-Cairn: Fair, But Deal Dynamics Could Change

IiAS believes that the deal, based on the current oil and commodity prices, is fair for both Cairn India and Vedanta Limited minority investors.

The deal is expected to be put to vote in the last quarter of 2015 – by which time the deal dynamics could change.

However, if oil price and commodity cycles begin moving in opposite directions going forward, the valuation dynamics will change, resulting in any one set of shareholders possibly vetoing the deal. Alternatively, if the Rs.200 bn income tax liability does fructify, it again changes the deal valuations. Finally, Cairn Energy and LIC could vote to overturn the transaction. Again, the list of regulatory hurdles to be crossed is long, which will impact the timeline – and the commodity price levels.

Therefore, while the deal appears fair at this stage, whether shareholders will pass the resolutions when it gets presented, remains to be seen.